How to negotiate a mutually agreeable contract

Put in its simplest terms, a contract is a mutually binding agreement between two or more people or parties of legal age. When entering a contract, is it not always likely that all parties will immediately agree upon the terms – therefore, negotiation will be required.

Put in its simplest terms, a contract is a mutually binding agreement between two or more people or parties of legal age. When entering a contract, is it not always likely that all parties will immediately agree upon the terms – therefore, negotiation will be required.

What do you want to get from the contract?

Before entering into contract negotiations you should ensure that you know exactly what it is you wish to achieve by working with the company. For example, if you are negotiating with a supplier, you may wish to agree to terms such as frequency of supply, delivery costs and payment details.

If you are the supplier, ensure that you know what your business is capable of providing – if you make promises that you cannot keep the other party may be entitled to take you to court, where you could end up paying a lot of money in damages and legal expenses.

Tips for negotiation

Bear in mind that there is no universal style of negotiation. Some people do better by staying calm and quiet when they negotiate whereas others may be somewhat more aggressive. However, you should always remain as reasonable and willing to compromise as the situation allows. Flexibility, patience and creativity are likely to be three of the main factors when coming up with a contract that all parties are willing to sign.

Start higher (or lower) than you will accept

Contract negotiations regularly involve a process of offers followed by counter-offers. By immediately stating the highest/lowest terms you are willing to accept (e.g. highest price you will pay as a purchaser, lowest price you will accept as a supplier) you leave no room to discover what the other party can offer. During negotiations, you may find that the other party can provide extra goods or services that you may be interested in or that they are willing to pay more/accept less than you expected.

Take your time

There is no legal limit to how long contract negotiations must take. Pressuring the other party to reach a deal in the shortest timeframe will not only irritate them, but may mean that both parties will rush into the first possible deal, which will not necessarily be the best possible deal. Rushing a contract may also lead to the other side stalling, or backing out altogether.

Make use of bargaining chips

When entering negotiations, do not just state the things you want to achieve – add in some extras so that you have more flexibility when conceding points.

Be reasonable

While you should always be as reasonable as possible, ensure that you stick to your main points to try and get what you want from the contract – do not concede key points because you are worried about what the opposite party might think of you. Should you give up on your key requirements too easily, the opposite party may see this as a sign of weakness and try to take advantage and gain themselves a better deal.

Justify your reasoning

Ensure that the other side understands why you require a certain point – and wherever possible, ensure that you point out why your requirements are of benefit to them. If you can explain why your requirements will be of use to them they will be more likely to agree to your terms.

Making concessions

You should make as few unconditional concessions as possible – always ask for something in return if you do choose to concede a point. By simply giving something up without asking for anything in return you may appear weak, and the other party may try to take advantage of this.

Rather than trying to focus on what you alone can gain, try to get to know the other party to see what each side can gain out of each point.

Be prepared to walk away

Not all negotiations can always end up in both parties coming to mutually agreeable terms. Should you find yourself in a position where both you and the other party, or parties are unprepared to budge on the terms you want, you should always be prepared to end negotiations. You should never change your goal halfway through negotiating if it appears that you are unlikely to achieve your original goal – this will cause frustration and may end badly.

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